Oil Slips Again as US-Iran Deal Reopens Hormuz, Risks Glut

Oil prices slid in early Asian trading after the U.S. and Iran signed an interim agreement that ends the Iran war and reopens the Strait of Hormuz. The deal also waives U.S. sanctions on Iranian crude. Brent futures fell 89 cents to $78.66 a barrel. WTI dropped 98 cents to $75.81.

The sell-off extended a decline that began when the accord was announced Wednesday. “Energy markets are aggressively pricing in a faster-than-expected return of Iranian barrels,” IG market analyst Tony Sycamore said in a note.

The 14-point memorandum starts a 60-day negotiation period. Iran will allow toll-free passage through the Strait of Hormuz, a vital chokepoint for oil and gas shipments. Traffic through the strait is supposed to return to full capacity within 30 days. The preliminary accord defers harder issues like Iran’s nuclear program and requires the U.S. and partners to develop a $300 billion plan to finance Iran’s recovery.

If the deal holds, this year’s supply crisis could flip into a significant glut next year. The International Energy Agency cautioned Wednesday that supply will exceed demand by 5.05 million barrels a day in 2027 as West Asian oil flows back to market.

The Federal Reserve adds another layer of risk for crude. Nine of 19 policymakers now think a rate hike will be needed later this year, up from zero in March. Higher rates would slow economic growth and suppress oil demand, compounding the supply-side pressure.

The 60-day period begins. Brent at $78.66 leaves room for further downside if Iranian barrels hit the market before year-end.